Employers and employees react to minimum wage court ruling

METRO DETROIT — Michigan employers, tipped workers and those earning the minimum wage are reacting to a Michigan Court of Appeals ruling that affects how employees are paid.

In a 3-0 decision issued Jan. 26, the Michigan Court of Appeals overturned a July 2022 Court of Claims ruling and declared that the Michigan Legislature lacked the constitutional authority to adopt and subsequently amend two 2018 ballot initiatives.

One would have increased the minimum wage to $12 per hour in 2023 and increased tipped wages to the full minimum wage. The other would have enacted one of most sweeping paid sick leave laws in the country, thereby requiring nearly every business across the state to make significant changes to their paid time off policies and procedures.

Vivian Smith is a 28-year-old from Detroit and a member of Fight for 15, a group which seeks a $15 an hour minimum wage. She has worked as a cook at a McDonald’s for five years and makes $10 per hour, which she said is barely enough to cover rent and her other bills. She believes that workers need increases in the minimum wage in order to make a living wage that matches how hard they work.

“I feel like the economy is getting worse and $13 is not enough. I am working so hard in the fast food industry, we do everything in the store, we do it well and we deserve better pay,” Smith said.

Marty Knollenberg is a former Michigan state representative and the owner of the Sedona Taphouse restaurant in Troy. He said he was relieved after the Court of Appeals ruling, saying that a different result could have been detrimental to businesses and, by extension, their customers.

“Obviously, this is good news for restaurant owners, for our services and for our guests in the short term,” he said. “I am happy with this decision. The other side is going to appeal, so we will have to wait to see what that appeal will look like and if the (Michigan) Supreme Court will take it up.”

The more bitter point of contention was the subject of changing the laws regarding the tip credit. Knollenberg said that eliminating tip credit could mean radically higher operating costs of businesses like restaurants and actually mean less pay for employees at establishments where they generally receive high amounts from tips.

“What happened was that a ballot initiative (was proposed) to increase the minimum wage took place and it also could affect the tip credit,” he said. “Such measures try to bundle multiple issues on one proposal. Most people wouldn’t be aware that increasing the minimum wage would also change how the tip credit works. Restaurant owners can explain to people (about) this tip credit or as I would call it, a ‘tip wage.’ (It) is a lower wage, which is $3.84 per hour, but that is offset by the tips they receive. If they aren’t making at least $10.10 an hour, the employer has to make up that difference. Nobody is making less than $10.10 per hour in my restaurant. I don’t know what problem they are trying to solve.”

Rogers countered that businesses have a responsibility to pay their employees a fair wage and if they are unable to do so, they are already failing.

“They shouldn’t be in business if they can’t pay us what we are asking for,” she said. “The economy is going up and they are not paying us the amount we need even though we are working hard. I do five things at work and get the customers out fast and sometimes I even stay after my shift is over.”

On Jan. 1, 2023, Michigan’s minimum wage rate increased from $9.87 to $10.10 per hour as set by Michigan’s Improved Workforce Opportunity Wage Act of 2018 establishing the annual schedule of increases. The increase to $13.03 for regular employees and $11.73 for tipped employees could still be appealed.